Thursday, December 24, 2009

Goldman Sachs statement about why it sold short against bundled mortgages it was selling.

They miss the fundamental point- these instruments (and the government programs that licensed but did not regulate them) were based on artificial prosperity and a selling of America at prices based on that illusion. We were (and are) in a deflationary period since 2000; housing and its price inflation and mortgage fraud was based on easy Fed money and sales and application fraud from bottom to top in real estate (customers, sales brokers, mortgage companies, IBankers and Traders), not on anything the markets were doing to create real value increases. 

As Goldman says, selling short was smart and the responsible activity (unless the traders had knowledge of the ongoing fraud- what do you think? I have my opinion on that one...:)).  The real fraud is in the development and sale of the prosperity illusion that led to the short selling opportunity.  The real story is in the application of the illusion strategy across all markets, not just "Synthetic" CDOs.  Wall Street cannot escape that reality with a one page explanation.  It is why the Street's anti-competitive license from Washington must go.  

Time to allow open source technology and information in multiple online trading markets with no regulation and no advantages based on licenses.  Let the participants create and manage the regulatory process (like we do so well online).   If there is fraud, let's be democratic about it and let everyone participate, not just the same old robber barons!

Saturday, December 12, 2009

Arrival of the Trading Class

Like it or not, the last ten years of no productivity followed by the "almost depression" were the start of a new direction for America that mirrors post-Industrial Revolution events in Britain and Germany that resulted in the creation of two tiered societies that function only to reward the "Trading" or Merchant Class.

Riches earned from Trading are the wealth of the Crown in a land where few do much that is good for underprivileged around the World. Protecting its Merchant Class and their ever more sophisticated and risky financial adventures is what England is all about.  In Germany the rise of the Trading Class led to the rise of the Third Reich.

In the US, Obama missed an opportunity to avoid that direction for the US and follow Roosevelt's lead of building and investing in communities and people. Had Obama studied FDR or the other two great Democratic Presidents- Jefferson and Jackson, he would have understood the risk of calamity that serving the Merchant Class brings on a once free society. Jefferson's ardent opposition to Hamilton's financial adventures are a great read for those wanting a quick understanding of this principle.

At a time when Roosevelt would have invested in the poor and created jobs and reigned in financial misadventures, Obama gave us TARP solutions that protect the very markets and people that caused our economic  downturn.  That catastrophic decision sets the direction for the last "American" century and entrenches a Wall Street led "Trading Class" at the helm of all US decisions.

It is ugly and about to get worse.  When the modest recovery stalls, Traders will follow the path they always take when they can no longer rely on the productivity and resources of their own society.  They will look overseas and try to take on wealth rightfully belonging to others.  They and the government they control will renege on financial obligations to other societies as well.  These two paths will require military support.

We are now well positioned in Afghanistan with an army whose imperative is unclear and whose brass has been looking for a path to success.  We must be careful to watch the interests of the Trading Class as it pushes and confuses our President to use that army to support trading programs.  If he wakes up and opposes them with a sharp progressive, populist stance it will be a miracle and maybe America's only chance to avoid real demise, as Obama's successor is likely to be a populist tool of the trading class who can inspire millions of uneducated people to take action directly contrary to their personal interests.

Sound familiar?  It should; that is what happened in Germany after WWI.

Saturday, December 5, 2009

Afghanistan- Why not Kick Ass Quickly and Leave?

Struggling to make sense of more troops in Afghanistan and find myself longing for the articulated, but abandoned Powell doctrine (Colin Powell circa 1992 after correctly turning back on the 'Road to Death' in the first war in Iraq)- only send troops if you intend to unleash their full fury (and accept the result)- bring them home asap and NEVER occupy anything- let the chips fall where may after you leave.  

What scares me about Afghanistan is that we are already occupying, we show no intent to really kickass and we are setting a timetable based on our western desire of a future for Afghanistan. I don't see any prospect for success and that makes me sad for our boys.

I hear this may be part of a grand regional strategy to contain Pakistan and India. I would love to understand that better and think that may be the product of too much Starbucks in the morning, too much Georgetown at night by State Department intellectuals pushing an overused army into its tenth year of war; close to the stretched out and failed war in Viet Nam.

Time to kickass and leave.